The Bull Case For Obamacare Enrollment: Citi Research

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Analysts at Citi Research have different convictions regarding the 2014 Obamacare Enrollment. Gary Taylor, hospital analyst for the firm, is bullish, while Carl McDonald, HMO analyst, is bearish on the possible outcome of the enrollment in the exchanges.


Enrollment in the Obamacare exchanges

Taylor believes that the enrollment in the Obamacare exchanges could be around 4 million individuals higher than the consensus estimate of 2 to 3 million individuals from October 1 to March 31, 2014.

See: The Bear Case for Obamacare Enrollment

According to Taylor, different members of the population allocate material marginal utility to have health insurance.  For example, people enrolled in employer-sponsored coverage spend an average of 8 percent of pretax income for their share of premiums. Taylor emphasized that a high percentage of the population want to have affordable insurance coverage.

The Bull Case For Obamacare Enrollment: Citi Research

Read: The Bear Case For Obamacare

Obamacare and Romney Care comparison

He noted that the Romney Care in Massachusetts successfully enrolled approximately 80 percent of uninsured individuals in the state, earning 150 to 300 percent FPL. According to him, the Obamacare and Romney Care are not perfectly comparable because of two reasons. Under Romney Care, subsidies are lower (5.7 percent of enrollees’ income) than Obamacare (9.5 percent of income). The penalties under Romney Care and the program itself was broadly supported during its roll-out, unlike Obamacare, which is opposed by Republican states.

Last April, Taylor projected that 10 million to 16 million uninsured would enroll in the Obamacare exchanges by 2016. According to him, since that period, 21 states chose not to accept Federal funding to expand Medicaid.

Monthly premiums

Given that fact, Taylor estimated that 2.6 million uninsured earning 100-130 percent FPL are eligible for the highest subsidy level at the exchanges. He noted that millions have more opportunity to “buy-down” from silver to bronze plans to lower their monthly premiums to $0, which is a good price point for enrollment. He added that CMS approved the “Arkansas plan” to use Federal MDCD matching funds for exchange premium support.

Taylor believed that the impact of health care reform would be more front-end loaded than consensus. He estimated that 5-10 million uninsured represent 50-70 percent of the uninsured utilization and bad debt in the hospital industry. According to him, the “frequent fliers” would probably assign the highest marginal utility to have insurance coverage and enroll sooner than the “young invincible” who would opt to enroll later. He said frequent fliers could potentially front-end load the benefits and significantly drive estimates higher.

According to him, hospital and emergency staffing equities such as HCA Holdings Inc (NYSE:HCA), Universal Health Services, Inc. (NYSE:UHS), and Team Health Holdings LLC (NYSE:TMH) are compelling with a 35 percent upside over the next six months. Taylor said, “Obamacare still constitutes the best near-term investment case for the sector in at least a decade.”

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